Redemption of securities: issuers repay debts, investors earn

Calculation method

Securities can not only be a means of investing and earning money, but also replace currency, acting as a means of payment. Calculation for certain types of securities will require you to understand the principles of their operation.

In general, all assets expressed by documents located in the investment world can be divided into 3 categories. We will base this classification on the basis of the profit-making mechanism for a specific instrument.

The first of these is the documentation establishing the right to ownership of a certain asset. By this method, the income received by the asset itself is documented to be assigned to the holder. The most striking example of this is company shares. Shares represent partial ownership of a certain company or enterprise. This can be either a service sector or a plant or factory. The main criterion for the possibility is the presence of the legal form of a joint stock company.

The second mechanism of securities is debt obligations. This is a wide range of order papers or documents upon presentation. The basic principle here is that there are two parties - the borrower and the lender. Such securities are bonds and bills, checks and other promissory notes. Perhaps this is the most interesting and “mechanical” method of investment

The third category represents futures contracts, where not assets or rights to them are traded, but the terms of trading of assets or rights. These include futures, options and forward contracts.

Procedure for payment of shares.

When establishing a joint stock company, it is necessary to determine the form and timing of payment for shares. The form of payment for shares is determined when it comes to establishing a company and when issuing additional shares.

In the first case, the form of payment for shares is fixed in the establishment agreement, in the second, in the shareholders’ decision on the placement of shares. Based on the Federal Law “On Joint-Stock Companies,” there are several options for paying for shares: — in cash; — securities; - property; — property rights; - rights that have a monetary value.

Shareholders have the right in the charter to determine the types of property with which payment for shares can be made. The topic of valuation of property contributed as payment for the authorized capital should be touched upon. Article 34 of the Federal Law “On Joint-Stock Companies” states that the monetary valuation of property contributed in payment for shares when establishing a company is made by agreement between the founders.

When paying for additional shares in non-cash, the monetary valuation of the property contributed to pay for the shares is made by the board of directors (supervisory board) of the company and is determined based on their market value.

When paying for shares in kind, an independent appraiser must be involved to determine the market value of such property. The value of the monetary valuation of property made by the founders of the company and the board of directors (supervisory board) of the company cannot be higher than the value of the valuation made by an independent appraiser. Property is transferred under a transfer and acceptance act at the time of establishment of the company, then registration of ownership of the transferred property must follow.

Now, with regard to the timing of payment for shares when establishing a joint-stock company: - distributed shares must be fully paid within a year from the date of state registration of the company, unless a shorter period is provided for by the agreement on the establishment of the company; - at least 50 percent of the company’s shares distributed upon its establishment must be paid for within three months from the date of state registration of the company.

What happens if the shares are not paid for by the founders or paid, but not in full?

In such cases:

• a share owned by the founder of the company does not provide voting rights until it is paid in full
• in case of incomplete payment of shares within the established period, the ownership of the shares, the placement price of which corresponds to the unpaid amount (the value of the property not transferred in payment for the shares), passes to the company
• shares are not taken into account when counting votes
• dividends are not accrued on unpaid shares
• if the agreement on the creation of a joint stock company provides for the liability of the founders in the event of non-payment of shares, a penalty (fine, penalty) may be collected for failure to fulfill the obligation to pay for shares.
• Before payment of 50% of the shares distributed among the founders, the company does not have the right to enter into transactions not related to the establishment of the company
• additional shares and other issue-grade securities that are placed by subscription can be placed only after they have been paid in full

When the ownership of shares is transferred to the company as a result of their incomplete payment, within one year from the date of acquisition of the shares the company is obliged to make a decision to reduce its authorized capital or, in order to pay for the authorized capital, based on the decision of the board of directors of the company to sell the acquired shares at a price not lower than their market value.

If the shares are not sold by the company within one year after their acquisition, the company is obliged to make a decision within a reasonable time to reduce its authorized capital by redeeming such shares. If, within the stipulated time frame, the company does not make a decision to reduce its authorized capital, the body carrying out state registration of legal entities, or other state bodies or local government bodies, to which the right to make such a claim is granted by federal laws, has the right to submit to the court a demand for the liquidation of the company.

When establishing a joint-stock company, the placement of shares is carried out on the day of state registration of the joint-stock company by distributing them among the founders of this company, and in the case of establishing a joint-stock company by one person - by acquiring them by a single participant.

Debt guarantee

Many financial market experts say that modern trading can already do without specific cash equivalents. According to such statements, the main method of calculation is debt obligations.

In a way, debt becomes a concrete tool for obtaining benefits. Considering that the value of money lies not in its availability, but in the ability to spend it, we can agree with the debt calculation method.

As a matter of fact, we can already see a similar principle regularly. Let's give two examples from different areas. The first is the purchase by an individual of a certain thing, say, a car on credit. Here the transaction has three parties: the buyer, the seller (car dealership) and the bank. The buyer contacts the bank, which transfers the funds to the car dealership, and transfers the car to the client.

There was no transfer of funds between the bank and the buyer, but the goods were delivered. And the client paid with a promissory note. Repayment of the loan will already have a formal monetary value, but the specific transaction was carried out without their use.

The second example of the use of a loan can be considered the processes of acquisition of one bank by another, larger one. A banking organization has its own set of assets, the main one of which is its receivables. These are those contracts with individuals and businesses to whom loans were issued. Loans will be repaid over time with interest, which means they are an asset.

If you believe that bank buildings and employees are also an asset, then you should abandon this judgment. Most often, banks rent premises, but even property that is used for its intended purpose is a working loss, as it requires costs to maintain operating activities and pay for utilities.

These two examples are quite simple, but most importantly, they show the principle of the importance of debts and settlements on them. The famous businessman, investor and writer Robert Kiyosaki often mentions loans in his works. According to him, the loan as such is not bad. The only important thing is the reason for which it was taken.

A set of documents and the procedure for submitting to the Federal Financial Markets Service.

State registration of issues (additional issues) of securities is carried out by the federal executive body for the securities market or another registering body.

The Federal Service for Financial Markets has 13 territorial bodies and 24 territorial departments. The heads of territorial bodies are appointed by the head of the Federal Financial Markets Service of Russia. In Moscow, the registration authority is the regional branch of the Federal Service for Financial Markets in the Central Federal District (RO FSFM of Russia in the Central Federal District).

The standards for issuing securities and registering securities prospectuses establish that for state registration of an issue (additional issue) of securities the following must be submitted to the registration authority:

• application for state registration of an issue (additional issue) of securities
• issuer questionnaire
• a copy of the document confirming the state registration of the issuer (Certificate of state registration of the company with OGRN number, Certificate of tax registration, Extract from the Unified State Register of Legal Entities)
• decision on the issue (additional issue) of securities
• a copy (extract from) the decision (minutes of the meeting (session) of the authorized person (governing body of the issuer), which made the decision to place securities, indicating, if this decision was made by a collegial management body, the quorum and the results of voting for its adoption, and if it was adopted by the board of directors (supervisory board), also indicating the names of the members of the board of directors (supervisory board) who voted for its adoption
• copy (extract from) the decision (minutes of the meeting (session) of the authorized person (governing body of the issuer), which approved the decision on the issue (additional issue) of securities, indicating, if the decision on the issue (additional issue) of securities was approved by the collegial governing body, quorum and voting results for its adoption, and if it is approved by the board of directors (supervisory board), also indicating the names of the members of the board of directors (supervisory board) who voted for its approval
• a copy of the constituent documents of the issuer in the current edition with all amendments and/or additions made to them (the latest edition of the Charter of the company)
• payment order (receipt of the established form in the case of cash payment), which confirms the fact of payment by the issuer of the state duty, levied in accordance with the legislation of the Russian Federation on taxes and fees, for state registration of the issue (additional issue) of issue-grade securities
• inventory of submitted documents
• expert report on the value of the property, if the authorized capital is contributed in kind
• a copy of the document confirming the issuer's ownership of the property (if real estate was contributed as payment for shares placed during the establishment of the joint stock company - issuer)
• letter from Rosstat about assigned statistics codes
• a copy of the decision of the sole founder on the establishment of a joint-stock company - issuer (minutes of the constituent meeting, which adopted the decision on the establishment of a joint-stock company - issuer)
• copy of the agreement on the establishment of a joint stock company
• the issuer in case of establishment of a joint stock company by two or more persons;
• report on the results of the share issue
• financial statements

All documents must be drawn up in accordance with the Standards for issuing securities and registering securities prospectuses, approved by Order of the Federal Service for Financial Markets dated January 25, 2007 N 07-4/pz-n.

If documents for the initial registration of shares are submitted without meeting the deadlines established by law, it will be necessary to additionally attach a letter in free form about the reason for missing the deadline.

As for paying the state fee, for the initial registration of the issue of securities it is necessary to pay a state fee in the amount of 20,000 rubles.

State registration of the issue of ordinary and/or issue(s) of preferred shares distributed among the founders (acquired by the sole founder) of the joint stock company upon its establishment, and the issue(s) of securities placed in other ways cannot be carried out simultaneously.

From the moment the documents are submitted, the registration authority is obliged to register the issue and the report on the issue of shares simultaneously within thirty days, provided that the issuer complies with all the conditions for the initial issue of shares.

Receipts as investments

Kiyosaki in his theories divides debts into good and bad. It is not difficult to guess that the good one will be the one that helps you build your monetary wealth. That is, a loan taken to develop your own business is a good debt.

An expensive camera borrowed by a professional photographer for his work is a good option. The same expensive camera taken just to record family holidays is a bad option. She won't bring money. For a couple of photos for the New Year, a regular point-and-shoot camera is also suitable.

A similar attitude towards debt can be seen in the stock market. Hundreds of corporations are ready to borrow from you and return the money with interest. This is an extremely good opportunity for them, since your money will be used to increase their working capital, and therefore to the growth of the company. The plan is to use them to earn more money. This strategy plays not only into their hands, but also into yours, because you will be paid back with interest. This is how bonds are formed.

Bonds are issued by both commercial enterprises and government ones. For both, the essence of this security is the same - an increase in the available amount. Securities debt is an excellent investment method. Especially when it comes to government bonds, which have a high level of reliability.

Time to pay the bills

The bonds are repaid on time. The maturity date of the security is stated in it, as well as in any documentation accompanying the certificate.

The terms can vary from short-term to indefinite. On average, government bonds provide a choice horizon from six months to 7-10 years. Depends on the specific purpose of the loan and the interest on it.

It is worth noting a frequent trend: the longer the validity period, the higher the annual interest on the security. Roughly speaking, by investing for 7 years you will earn more than investing twice for 5 years.

Bonds held to maturity are more common. Upon purchase, they fall into the hands of the investor, where they can be redirected to the depository. When the term expires, they are returned to the issuer, who returns the amount.

What is the yield to maturity of bonds, calculation using formulas

The yield to maturity (YTM) of a bond security is the rate of internal return on the cash flow of a debt security if it is purchased before the obligations on it are fully repaid.

This indicator is subject to calculation. This is necessary for the investor, namely to calculate the fair value of the debt security. It includes exclusively economic costs that have reliable justification.

The bond yield is calculated identically to the internal rate of return. There are several nuances that you need to know before making calculations.

Bonds are sold at a discount if its coupon yield (CY) is less than the DP.

At the price established by the issuer, bond securities are sold if CD = DP.

In the event that the CD is greater than the DP, the debt security is sold taking into account premium interest.

A simple formula for a bond's yield to maturity is:

DP = KV/C*100 , where

• KV – coupon payments;
• C – the value of the bond at the time of purchase.

Example

If you buy a debt security for a par value of, say, 1000 rubles, and the coupon payments on it amounted to 150 rubles, then DP = (150/1000) * 100. Consequently, the yield will be 15%.

Let's consider a situation where the bond paper has been used for more than one year and coupon payments continue to be received, then the yield to maturity of the coupon bond should be calculated:

DPK = ((N-C)+KV)/C)*365/DN*100 , where

• C – price of debt security;
• N – price equal to the last sale quote;
• CV – coupon payments for the entire period of use of the debt security;
• DN – the number of days that reflects the actual holding (use) of the bond.

Example

The cost of the debt paper is 980 rubles for purchase, and 1000 rubles for sale. 150 rubles are paid annually in coupon payments, and it is planned to use the bond for approximately 1095 days.

Accordingly it turns out: (1000-980)+450/980*365/1095*100=35%

Knowing simple formulas, each investor will be able to calculate his future profitability from the purchase of a bond paper until its full repayment.

Other securities and their repayment

The liability sector doesn't end with just bonds. A bill of exchange is the same instrument of debt, but is more common in private circles than on the stock exchange. It also differs in that it is issued by a bank, but is signed by a private person, the formal issuer.

A bill is a fixation of a certain debt amount. Its repayment is made by paying money to the bearer. Upon payment of the full amount (or the amount with interest, if this is stated in the documented terms of the bill), the bill ceases to be valuable, because all financial assets on it have already been received.

If the payment process has not been completed on time, legislative sanctions begin to apply, carried out in accordance with the “Regulations on bills of exchange”; as a rule, the amount of debt begins to increase daily by three percent, but options are possible. The penalty may also be specified in the accompanying documentation of the certificate.

Private use

As already mentioned, the bill of exchange is often used by private individuals. It can act as a means of calculation. So, for example, for a certain transaction you have the right, with the consent of the other party, to pay not in cash or by bank transfer, but with a similar asset.

The principle has much in common with a check. The same link to a banking organization and indication of a private issuer. Only now the check does not become a debt, but only a kind of “ticket” that gives access to the specified amount from the account of the person who issued it to another person, who is also written on the check.

Transfer of the bill and rights under it is possible. To do this, the real owner must make the appropriate inscription on the certificate. This inscription is called an endorsement and its task is to transfer rights under the bill.

The next transfer is carried out according to the same principle, but the endorsement is carried out by a new person, the one who acquired the status of owner after the first act of transfer of rights.